The woman said that Hegseth, who was then a Fox News host, took her phone and blocked the door to a hotel room while at a Republican conference in California, according to the report.
Hegseth, a former National Guard officer, has denied any wrongdoing and claims the encounter was consensual. He was never arrested or charged.
The 22-page report includes interviews with the victim, a hotel staffer, a nurse and a witness who was at the hotel at the time of the alleged incident.
Trump is standing by his nominee in the wake of the report and allegations. He released a statement on Thursday that called Hegseth a "highly-respected combat veteran who will honourably serve our country".
“This report corroborates what Mr Hegseth’s attorneys have said all along: the incident was fully investigated, and no charges were filed because police found the allegations to be false," Trump spokesperson Karoline Leavitt said.
Police were first notified of the alleged assault from an emergency room nurse.
They contacted law enforcement after treating a woman who claimed she may have been drugged and sexually assaulted while drinking with colleagues at a political gathering, according to the report from the Monterey Police Department. The report was
obtained by Mediaite and other US news sites.
The nurse told police that the woman "believes that something may have been slipped into her drink as she cannot remember most of the night's events".
The woman at the centre of the claim, who is unnamed in the report, later identified the man as Hegseth.
Hegseth, a 44-year-old veteran, will be responsible for the world's most powerful military in his first political role if confirmed by the US Senate as Trump's pick for defence secretary.
The woman met Hegseth at a Republican conference where he was a featured speaker, according to the report. She said she saw Hegseth acting inappropriately with other women and confronted him at an after-party in a hotel suite.
She then went to the hotel bar with Hegseth and a group of people, at which point "things got fuzzy", she told police.
The woman told police she remembered arguing with Hegseth near the hotel pool. A hotel staffer who addressed the disturbance confirmed this to police, the report says.
The woman told police she remembered later being with Hegseth in an unknown hotel room, where she claimed he took her phone and blocked the door.
She told police she remembered "saying 'no' a lot", according to the report.
Her next memory was Hegseth hovering over her while she was lying on a couch or bed, she told police.
Hegseth told police that he was "buzzed" the night of the incident, but not drunk, according to the report. He said he met the woman at the bar and claimed she led him by his arm to his hotel room.
Police recommended the case be forwarded to the Monterey County District Attorney's Office for review. Hegseth was never arrested or charged.
Hegseth's lawyer Timothy Parlatore previously told the BBC's US partner CBS News that Hegseth paid the woman to stay quiet so he would not risk losing his job at Fox News.
The agreement deterred the woman from moving forward with a lawsuit, Mr Parlatore added. Hegseth continued to deny any wrongdoing.
Hegseth, a cabinet nominee of President-elect Donald Trump, denies any wrongdoing in the 2017 encounter.
www.bbc.com
